Suppose the value of the S&P 500 stock index is currently 1,000. 1-a. If the 1-year T-bill

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Suppose the value of the S&P 500 stock index is currently 1,000.

1-a.

If the 1-year T-bill rate is 7% and the expected dividend yield on the S&P 500 is 6%, what should the 1-year maturity futures price be?

Futures price

1-b.

What if the T-bill rate is less than the dividend yield, for example, 1%?

If the t-bill rate is less than the dividend yield, then the futures price should be:

a.)less than the spot price

b.) more than the spot price

Related Book For answer-question

Essentials of Investments

ISBN: 978-0077835422

10th edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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Posted Date: Mar 10, 2024 04:37 AM

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Suppose the value of the S&P 500 stock index is currently 1,000. 1-a. If the 1-year T-bill

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Expert Answer:

Futures Price Calculations for SP 500 Index We can calculate the theoretical futures price using the following formula Futures Price Spot Price 1 Risk... View the full answer

Essentials of Investments

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